End of cheap corn? Sharpen your pencils

Candace Krebs | Nov 02, 2006

Dan Childs, ag economist with the Noble Foundation at Ardmore, Okla., says stocker operators have to look harder at supplemental feeding strategies and put a pencil to cost of gains in light of rising corn prices.

Childs, speaking at the recent Greater Oklahoma Farm Show in Chickasha, predicted much stronger corn prices for the foreseeable future. He said a recent price rally and tight corn supply report may be attributed to the ethanol boom and could put downward pressure on feeder cattle.

“We may not see $1.80 corn for a long time,” Childs said. “I don't think we will be able to send calves into the feedyard like we have been. We'll have to find some way to keep these calves at home.”

Corn price will be the No. 1 factor affecting feeder prices this spring, he said. “Corn is a major risk.”

Hay stocks also are about a third of normal. “We've sent a lot of cows to slaughter and that also affects stocker prices,” he says. “We haven't been building numbers.”

There's no increase in heifer retention from a year ago, due to drought. That has sent the industry into an atypically long cattle cycle extending out 15 years, he said. While finished cattle coming out of feedyards in recent months have made money, Childs said, feedyard profitability, which affects stocker prices, is on a downward trend.

According to the Livestock Market Information Center — a cooperative effort between state university Extension specialists, USDA economists and industry cooperators — cash corn prices could be $3 a bushel by next year, and cattle feeders are likely to end the year in the red. Feeder calves are forecast to decline while slaughter prices remain flat.

Childs said United States has fallen behind Brazil, because of BSE restrictions, and it will take a long time to restore previous trade levels. Canada and Mexico also affect live cattle supplies.

He said 20,000 head of calves come into the United States from Mexico every month. “That adds to our supply,” he said.